Letter: Medical GPOs under fire in Congress

Editor: GPOs -- Group Purchasing Organizations -- were formed by hospitals in the 1970s to keep from getting squeezed by huge suppliers of certain supplies, like say, syringes. By mid 1970s large hospital chains spun off for-profit GPOs and charged reasonable membership dues; like buyer clubs. Soon virtually all hospitals joined. Enter GPO lobbyists to Congress and in 1986 GPOs were exempt from anti-kickback provisions in Medicare law. Instead of saying bribe or kickback you should say "fee.'' "Fees'' from companies to GPOs would be a percentage of whatever a company made selling say bandages to member hospitals. Now GPOs' profits were tied to the profits of suppliers. Take a deep breath: "pay-for-play'' set in and snowballed. As Prakash Sethi of the International Center for Corporate Accountability at Baruch College put it, "It's a gravy train,''...so, "why should the medical supply industry get off?'' If you're a small company with a better, less expensive miracle product you're likely to be squashed by huge suppliers and why should a GPO collect fewer "fees.'' It's interesting how we didn't hear about GPOs during the Medicare reform debate since you'd think eliminating kick-back protections would save money.

Sen. Bill Nelson was one of three senators to launch an investigation but they're up against a powerful and secretive industry and hearings this year are unlikely, according to Senate staffers. Documents to Congress have shown up front payments from suppliers of up to $3 million in return for awarding them contracts in addition to "fees.'' Hospitals, not vendors, should be the main customers. I hope I've given you a basic peak at a very complicated situation in under 300 words but if you're a glutton for more depressing details, try Mariah Blake's piece in the July/August issue of Washington Monthly or Prakash's book.